“Testing Loss Reserving Methods, Models and Data Using the Loss Simulation Model” Call for Papers Announced

10/20/2010 —

The Casualty Actuarial Society (CAS) is pleased to extend a call for papers on the topic of “Testing Loss Reserving Methods, Models and Data Using the Loss Simulation Model.” In this call paper program, participants will work with the Loss Simulation Model to develop enhancements to the model, perform additional testing, and apply the model to test alternative loss reserving methods and models. The model and manual are available on the CAS Loss Simulation Model Working Party website. Papers should describe the issue to be addressed (e.g., which of several loss reserving methods or models works best in a given loss reserving situation), the author’s approach to using the Loss Simulation Model, and any model enhancements or testing performed on the model.

This call for papers is intended to foster the use of the Loss Simulation Model and to generate publicly available improvements to the model. Authors of accepted papers may be invited to present their work at the 2011 Casualty Loss Reserve Seminar (CLRS). In addition, the papers will be published in the CAS E-Forum and will be available on the CAS Web Site prior to the 2011 CLRS. A $10,000 prize fund is available to offer prizes for the best submission(s). Both CAS members and non-members are invited to submit proposals for papers.

Call Paper Scope

This call will be unique in that there are specific areas which the Loss Simulation Model Working Party (LSMWP) is looking to have addressed, in addition to seeing applications of the model to test alternative loss reserving methods and models. The following model enhancements would be welcome:

Include covariates as categorical or numeric variables in setting the parameters for the distributions. For example, in the modeling for claim size, if “state” is a categorical variable that affects the parameter of the distribution, we can include this information as input for the model, rather than setting up a separate “type” for each state. The covariate should be passed to the output detailed claim file.

Additional pairs (or groups) of variables whose sample values may or may not be correlated which may be required to simulate claim transactions for a specific type of business.

General “sets of parameters” for simulating a line or sub-line of business and the results of testing those parameters against real data. NOTE: Submission of the real data is not a requirement so that you can protect the confidentiality of your data, although submission of data stripped of all confidential information is encouraged.

Input and output to and from standard database programs.

The following additional tests of the Loss Simulation Model would be welcome, and could be performed while testing alternative loss reserving methods and models:

Poisson frequencies have been tested, while negative binomial frequencies have not been tested.

Correlations of mean frequencies across lines of business have been tested, while correlations between size of loss and report lag within a Type have not been tested.

Ultimate claim values have been tested, while the sequence of loss reserve changes has not been tested.

The Single Payment Model has been tested, while the Periodic Payments Model and the Multiple Random Payments Model have not been tested.

The mechanics of certain parameters such as alpha, severity trend, inertia, etc. have been verified by examining the code. However, output from runs using these parameters has not been verified.

Apply the approach recommended by Glenn Meyers in Section 3.2 of the LSMWP Paper to test the ability of simulated data from the Loss Simulation Model to represent “real” data.

Other tests, enhancements or topics not on these lists are also welcome as long as they address something specific to the Loss Simulation Model or its intended uses.

In order for a paper with a model enhancement to be considered by the Committees, the author must authorize the inclusion of the add-on, or other code enhancements, into the Loss Simulation Model. Test results and documentation for these model enhancements should be included within the paper.

Participants should be prepared to make formal presentations supporting their approach and conclusions.

Call Paper Timetable

Timely submission of papers is critical to the success of the call. The procedures and timetable enumerated below will apply.

Deadline for Proposals

By November 24, 2010, authors should submit a one to two page proposal for their papers including the title, a short description of the issue(s) to be addressed, and the approach that will be taken. Proposals should be submitted electronically via e-mail to Karen Sonnet at the Casualty Actuarial Society at ksonnet@casact.org. Please put "2011 LSMWP Call Paper Proposal" in the subject line of the e-mail message.

Acceptance of Proposals

By December 22, 2010, the Dynamic Risk Modeling Committee and the Committee on Reserves will make a decision on all proposals. The number of accepted proposals may be limited. The Committees will contact authors regarding their proposals.

Monitoring Progress

A Committee member will be assigned to work with each author to monitor the paper’s progress and provide general guidance in completing the paper. By mutual agreement, the author and the assigned Committee member will establish a schedule for the production of interim drafts.

By April 1, 2011, a completed draft of the paper will be submitted to the Chair of the assigned Sub-Committee for review.

By April 29, 2011, the Sub-Committee will forward review comments on the draft to the author(s).

Completion Date

By June 7, 2011, the Dynamic Risk Modeling Committee and the Committee on Reserves must receive the completed paper for its review. Each paper will be screened by these Committees to assure its quality of exposition, relevance to the call and to reserving research, and adherence to format requirements described below. This final version should include any proposed model enhancements, including program documentation and test results.

By June 21, 2011, all authors will be notified as to the results of this screening process. Accepted papers will be published electronically in the CAS E-Forum and will be available on the CAS Web Site prior to the 2011 Casualty Loss Reserve Seminar. Authors may be invited to present their papers at the CLRS scheduled for September 2011 in Las Vegas, NV. Each invited author should make every effort to attend the CLRS and present his/her paper.

Prize Competition

All papers submitted and accepted in response to the call and meeting the minimum standards established by the Committees will be included in a prize competition. A total fund of $10,000 is available for the best papers and model enhancements submitted in response to the call. The Prize(s) will be announced and presented to the author(s) at the 2011CLRS. Papers will be evaluated by an independent review committee that will judge the papers and model enhancements anonymously. If no paper or tool is considered eligible, the award shall not be made. There is also no guarantee that the total monetary fund, set at a level to recognize more than one paper or model enhancement, shall be exhausted.

Authors will be required to provide an electronic copy of the paper and will be asked to sign a "Permission to Publish" form allowing the CAS to publish the paper. In order for a paper with a model enhancement to be approved for publication by the Committees, the author must authorize the inclusion of the enhancement into the Loss Simulation Model. Test results and documentation for these model enhancements should be included within the paper.

Authors are encouraged to submit PowerPoint presentations incorporating the details of the paper's calculations. The presentations will be posted on the CAS Web Site along with the paper.

It is hoped that the authors will also submit their papers for publication in Variance in accordance with the Submission Guidelines. However, acceptance of a discussion paper for this call does not guarantee its acceptance for publication in Variance.

The Dynamic Risk Modeling Committee and the Committee on Reserves look forward to receiving proposals in response to the call, and are happy to respond to inquiries from interested parties. Questions may be addressed to Robert Bear or Mark Shapland at their CAS online directory addresses or via e-mail to ksonnet@casact.org. Your participation in this effort will contribute to the written body of knowledge of the CAS.